Let $\mathrm { U } ( \mathrm { x } , \mathrm { y } ) = \sqrt { x y }$

question 72

Multiple Choice

Let $\mathrm { U } ( \mathrm { x } , \mathrm { y } ) = \sqrt { x y }$ with $\mathrm { MU } _ { \mathrm { x } } = \frac { \sqrt { y } } { 2 \sqrt { x } }$ and $\mathrm { MU } _ { \mathrm { y } } = \frac { \sqrt { x } } { 2 \sqrt { y } }$ . Let $\mathrm { I } = \$ 100 , \mathrm { P } _ { \mathrm { x } } = \$ 25$ and $\mathrm { P } _ { \mathrm { y } } = \$ 10$ be the initial set of prices and income. Now, let $\mathrm { P } _ { \mathrm { x } }$ fall to $\$ 10$ . What is the approximate compensating variation for this change in prices?

• A) 24
• B) 30
• C) 34
• D) 40

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Definitions:

Ethics

A branch of philosophy dealing with the moral principles that govern a person's behavior or conducting of an activity.

Preconventional Level

The first level in Kohlberg's theory of moral development, where behavior is guided by punishment and self-interest.

Conventional Level

A stage in Kohlberg's theory of moral development where individuals' morality is shaped by societal norms and rules.

Moral Development

The method by which people form appropriate attitudes and actions toward others in society, influenced by societal and cultural standards, regulations, and legislation.